Scott was elected the first Member of the Scottish Parliament for Shetland in May 1999.[3] He was also the first parliamentarian for the Shetland Islands as a distinct entity; up to that point there had only been a single UK parliamentary constituency for both Orkney and Shetland. He served as a Deputy Minister for Parliament in the Scottish Executive from 2000 to 2001 in succession to his colleague Iain Smith, but resigned after refusing to support the Executive in a vote in the Parliament on a tie-up scheme for fishing.

After the resignation of his friend and former ministerial colleague Nicol Stephen, Scott declared his candidacy for the leadership of the Scottish Liberal Democrats on 7 July 2008 at Lerwick harbour, surrounded by a group of men dressed as Vikings which is a tradition in Shetland called Up Helly Aa where Shetlanders celebrate their Viking heritage.[5] On 26 August 2008, he was announced the winner of the leadership contest with 59% (1,450) of the votes.[6]

Following what he described as a "disastrous" set of results for the Scottish Liberal Democrats in the Scottish elections in May 2011, Scott offered his resignation as leader (remaining a Member of the Scottish Parliament).[7] He claimed the poor showings were in part due to the coalition deal which saw the Liberal Democrats form a government with the Conservatives after the United Kingdom general election, 2010.